What is "market failure"?

_Field failure refers to the situation where _the market cannot allocate goods and services efficiently. For economists, the term is usually used when inefficiencies are particularly significant, or when non-market institutions are more efficient and their ability to create wealth is better than private choice. On the other hand, field failure is often used to describe a situation in which the power of the field cannot satisfy public interests. Here we focus on the mainstream views of economics. Economists use modeling theory to explain or understand this situation. The two main reasons for market failure are: \x0d\\x0d\　?Inappropriate communication of cost or profit prices, which in turn affects the individual economic market decision-making mechanism. \x0d\　?Suboptimal_field structure. \x0d\　The existence of field failures in certain economies often leads to debates about whether operations should be guided by field forces. This also creates controversy over what should be used to replace the field. The most common response to market failure is the partial production of goods and services by government agencies. However, government intervention may also cause non-market failures. \x0d\\x0d\　[Editor] Original market failure\x0d\　 (1) Economic externalities: Enterprises or individuals produce benefits or harm in production or consumption, but the actors do not receive rewards or compensation for this. The consequences of this activity are called external economic effects, which make the perfectly competitive market lose its efficiency. In a market economy, externalities make individual costs and benefits inconsistent with society. Therefore, decisions that are optimal for individuals are not optimal for society. \x0d\\x0d\　 (2) The problem of externalities is related to the particularity of public goods, that is, non-exclusiveness and non-contestability. Market mechanisms generally cannot solve the problem of efficient allocation of public goods. The nature of public goods leads to the phenomenon of "free riding". (3) Coase Theorem: When there are no transaction costs, no matter how the property rights are arranged, economic efficiency will not be affected; when transaction costs are not zero, the arrangement of property rights may have an impact on efficiency. Economic externalities, public goods, and property rights systems make the market ineffective. This is the original market failure theory. \x0d\\x0d\　[Editor] New Market Failure Theory\x0d\ \x0d\　(2) Information asymmetry makes many markets incomplete\x0d\\x0d\　A. Information asymmetry means that one party to the transaction has information or actions that cannot be observed or verified by the other party\x0d\\x0d\　B. Information Asymmetry leads to incomplete contracts, and it is believed that information that cannot be observed and verified by all parties cannot be written into contract terms to constrain the behavior of both parties to the transaction\x0d\\x0d\　C. One party to the contract takes advantage of the incompleteness of the contract to harm the other party Behavior that is not subject to contract constraints or punishment is called opportunistic behavior\x0d\\x0d\ D. Opportunistic behavior before signing a contract is called adverse selection; opportunistic behavior after signing a contract is called moral hazard. Incomplete information and incomplete markets make market failure problems widespread, which is a new market failure theory. (Reference: Stiglitz pointed out that the first theorem of welfare economics is flawed.) The reality of information asymmetry and the two assumptions of the traditional market model, that is, the neoclassical model - "complete market" and "competitiveness" There is a contradiction between "market" and the assumption of "complete market" itself is inconsistent with the assumption of "competitive market". If we consider that information cost is greater than zero, that is, information asymmetry, the market economy cannot achieve Pareto efficiency. Although the problems to be solved in the socialist economic transformation are to clarify property rights relationships and form incentive and competition mechanisms, the most important thing is to solve the information problem. The so-called information problem, according to Stiglitz, refers to the negative impact of asymmetric and incomplete information on the efficiency of market allocation of resources, that is, the effectiveness of the market. \x0d\\x0d\ Stiglitz enumerated the consequences of these information problems: \x0d\\x0d\ (a) Incomplete information and asymmetric information make the market mechanism incomplete. \x0d\\x0d\　 (b) Information asymmetry also severely limits trading opportunities. \x0d\\x0d\　 (c) Information asymmetry leads to the emergence of two problems: the (adverse) selection problem and the incentive or moral hazard problem. \x0d\\x0d\　 (d) Stiglitz also found that incomplete information leads to incomplete markets that lack competition. \x0d\\x0d\　[edit]_Types of field failure\x0d\　Imperfect competition_Field\x0d\　Monopoly (Monopoly)\x0d\ x0d\　?Cartel\x0d\　Oligopsony of buyers\x0d\　Monopolistic competition\x0d\　Price discrimination (or differential pricing, Price discrimination)\x0d\ Fat strategy (Price skimming)\x0d\[edit] Causes of competitive market failure\x0d\ There are four basic causes of competitive market failure: market power, incomplete information, externalities, and unfair products.